1. Hi Steve, many thanks for your CYA insights and feedback on Melbourne presentation. You mention that CYA traded at a slight discount even after WAM deal was announced, what I note (and can’t get my head around) is that retail shareholders can still pick up shares on the market cheaper then the estimated prospectus issue price. Doesn’t that imply that the offer might be undersubscribed?

    1. Hi Solt,

      The comparison of market prices should be made with the live pre tax NTA, which may differ from any prospectus info where they can only estimate. It will be the live pre tax NTA that the new shares will eventually get issued at and this changes every day.

      After the deal was announced late last year you could certainly buy shares below the pre tax NTA, which continued this year. I believe it was only really this month when other Wilson shareholders were sent an email about CYA where this seemed to change. Since then I don’t think there has been much of an opportunity to buy at below the pre tax NTA but I could be wrong as I don’t necessarily track it exactly every day. But there was suddenly increased buying interest from that point as you see with the volumes.

      I think someone raised your point at the meeting though and Geoff always seems to have on hand “live” NTAs of many LICs, CYA obviously included. He believed the market price was at a small premium to the live NTA. (Of course that could have changed since).

      Don’t forget we are not privy to how the NTA has moved since March 31. Since I made this blog post we also must remember CYA has gone ex a 2.7 cents franked dividend, so this needs to be subtracted from any current NTA estimate.

      I was thinking the CYA NTA might be around 94.5 cents now and you might get some shares tomorrow at 94.5 if markets don’t do much tonight. Major players in the market may be limited to what is on offer though.

      I can’t see a clear discount right now though and hence guess punters will try their luck via the capital raising, probably preventing many from bothering paying up on market. Time will tell if they get their required fill there. Right now I see some shares on market possibly below the prospectus shares but possibly above. Investors may also have different appetite about getting exposure now or later.

      I think it’s page 17 of the prospectus might help with all this stuff, it can get a little complicated.

      Were you thinking there is much of a discount? Possibly a cent since ex div day but I don’t see much, possibly none.


      1. Thanks for your detailed reply Steve.

        My NTA assessment was similar to yours, in 94c-95c range, but I didn’t word it properly, by slight discount I meant slight discount to the estimated issue price with a number of assumptions main one being portfolio stays largely the same (which I know is not a given, but IMHO likely due to business continuity premise).

        I have since decided to wait couple of weeks to see how banks’ results will play out and by the looks so far the first week of May is bringing some volatility for CYA’s holdings. If that continues I thought I might subscribe for a small parcel after I noted an announcement that priority allocations under 20k will be filled without scale back.

      2. I’m taking a similar approach. Hopefully soon they release a NTA update that shows whether Wilson have already adjusted the portfolio meaningfully. As I hold some CYA already I’m hoping with a bit of luck they opportunistically lightened up on the banks. Wilson would generally hold far less banks than the index compared to the old CYA managers. They may not have traded much though as they would expect a big inflow of cash coming with the capital raising. Your point about business continuity is another reason the portfolio might still be quite similar. At the meeting though Geoff was asked about some holdings and the way he spoke he seemed quite comfortable trading out of certain stocks straight away if the opportunity presented itself.

        I suppose closer to the closing date for applications, if there is a premium gets established to NTA and the market drifts further I would consider applying. As you said you would get $20k in the priority allocations if it was oversubscribed. My best guess now as I write is it is very close to the live NTA level. Things could change though in the next couple of weeks so no need to rush the application.

      3. Well, last couple of weeks sure were eventful. Budget, banks sold off, interesting comments in NTA’s and presentations. I gather they lightened on banks in WLE, but… Century portfolio is largely intact as they await ATO’s ruling, which i understand is another week away at best. Matt didn’t sound too happy when he spoke about it. With banks still being largest holdings NTA would go down somewhat. Hope ATO’s ruling would be favourable and hope they disclose the outcome regardless (do they have to?). In the meantime, I decided to partake in the raising, but with a smaller parcel. Looks like it will be a long play.

        Nice new design by the way, easy on the eyes.

      4. Yeah I was disappointed to see how much banks featured in the CYA April NTA. CYA has traded better than WAM and WAX in the last month though. So the relativities have closed but not the way I prefer. I’d like CYA at a bigger premium rather than it be by the WAM & WAX premiums being cut.

        I haven’t applied for more CYA. Did you attend one of the Wilson presentations in the last week? I had planned to in Melbourne on Monday but didn’t bother in the end.

        If I could be sure I would get allocated WAM microcap I’d probably apply simply to sell in the first week or two, but not sure if it’s worth bothering. I keep a minuscule WAM holding for such things or a SPP. Maybe they will try and allocate as many parcels up to $20k or so? Any idea there?

      5. Watched presentation online, check it out here: https://youtu.be/IzPThQH20uk Century comments are at 19min mark from Geoff and then just after 1h 8min mark from Matt.

        I dont see Century trading at bigger premium, not while the raising is still on. It probably has to wait until WLE gets rid of options, establishes a premium, and only then century will catch up. So a long(-ish) game.

        On the microcap I’d say they will look after retail shareholders as they have done before. I’d look out for announcements as I’m sure they will advertise when they hit 100mil or 154mil or any other significant milestone. They don’t close raisings early as far as I remember, so there’s still time to ponder.

      6. Thanks I keep forgetting to go online for these.

        As I write I am just giving both some more thought. On the microcap your application is finalised when you pay them. Think I will just pay early anyway just in case. I suspect you are correct in that there will be an interim announcement with further milestones, but I can’t see myself changing my mind so might just get it in now.

        With the market very weak CYA is looking more interesting and not much time to decide. Right now I think you clearly have to pay a couple percent more on market to get shares versus going through the priority raising. I guess the shares are one or two percent above the pre tax NTA.

        I fully agree that WLE options limit the prospects of much of a larger premium being established with CYA though. Probably just stick with my existing CYA shares here but nice to see the price holding up today so far.

        Overall market weakness and particularly in the banks is handy for the Wilson relative performance versus the indices in the short term.

  2. Very interesting. I own some WLE but was interested in this. Reading through the prospectus now to see if it is something I would be interested in. If it’s going to mirror WLE pretty similarly then I don’t really see the point in holding two basically identical stocks. Also, why would WAM consider running something like this if it were to be the same as WLE?

    1. It will be quite similar but not entirely the same given the ASX300 is the benchmark for CYA.

      The tax losses are basically why this is not getting rolled into WLE immediately. They want CYA holders to benefit sharing most of these first. That is the main reason for this structure, rather than inventing a new product.

      If they use up these losses I would think a fair chance it merges with WLE at NTA in the future. If you believe this CYA is perhaps worth closer to the current after tax NTA, and maybe a better entry into WLE?

      Not that much pricing inefficiency between these two perhaps now CYA is a bit stronger than a few months back. WAM just seems very expensive now that they may have to drift away from smaller opportunities given size constraints, and the new microcap LIC coming on.

      1. Agreed to all your points. As I am already a holder of WLE, I don’t think I will take this offer. But I may look into the microcap that Wilson put forward soon. Any ideas of a ticker yet for this?

      2. I’m not sure about detailed info on the Wilson microcap LIC, just heard it is not far away. If they cap it at $150 million guessing it will be difficult to obtain much stock. A rare case of a LIC IPO destined to trade at a premium for some time I’d say.

    1. Yes the Etfwatch site does make the point the market is not always rational and loves dividends so much right now, so maybe we don’t see much change in relativities. If the tax losses get utilised quickly though CYA should eventually pay a high yield.

Leave a Reply to Steve Green Cancel reply